Concerns Over Mexican Crop Keep Market Firm in the Face of Projected Good 2017 Supply

To say that China’s entry into the pecan market has been a double-edged sword would be an understatement. Their appetite for large, high quality, high yielding inshell, and their willingness to pay exorbitantly high prices to get it, has not only reshaped the US pecan market but has led to increased pecan production, and competition, around the world. While the principle benefit has been to significantly improve returns to the grower, every pound on inshell headed to Hong Kong has meant one less pound that could have been sold to long-term US domestic customers. Based on the latest FAS figures, as well as the July Cold Storage holdings, the US domestic market again took a back seat to China. As illustrated in the graphs in the 'Market Conditions' section of the Pecan Data Page, this trend has continued for some time (all figures are based on inshell equivalent pounds).

The downside; customers who have long been the foundation of the pecan industry are slowly being forced to find other alternatives. While one of the American Pecan Council’s stated objectives is to increase domestic consumption, they have little control over the acreage being planted.

As for the Cold Storage figures, the data released today seems to contradict what is currently going on in the market. While the FAS figures show significant increases in overseas shipments, particularly to China, the Cold Storage figures indicate that high prices are finally starting to have an impact on overall consumption. While many within the industry feel that the Mexican crop could be off by as much as 15 to 20%, thereby creating possible supply problems in the months ahead, the projected increase in the size of the US crop, a good South African crop and a large US carryout could result in a supply situation similar to last year. China has traditionally been an ‘alternating year’ buyer (see graph in 'Market Conditions' section of Pecan Data Page). With the high price of inshell, and an increasing appetite for shelled pecans, will China continue to pay near record prices for both? What will the US buyers do considering that there are cheaper alternatives for many of their products, particularly in the baking and retail segments?

Speaking of the FAS export figures, there could be significant errors in the figures/prices shown for shelled pecan exports to both China and Mexico. The apparent errors have been brought to their attention, but based on prior history, it could take months before they are reconciled. Due to the significant increase in the amount of meats being shipped to China, any changes will need to be closely monitored.

Finally, I have received several calls recently wanting to know if the American Pecan Council was the body behind PECANREPORT.COM, an entity which recently started sending our pecan related reports and information. IT IS NOT. The APC publishes its own newsletter which is clearly identified as an official communication from the Council. Having had received the report, I started looking into who, or what, was behind the emails. After speaking with a few people around the industry, and sending an inquiry to the site’s administrator, I was able to get a name, but that was it. The administrator would not provide any information as to who was the owner of the site, who was backing it, who was writing the reports etc. In fact, they refused a phone call and indicated that any inquiries would have to be handled via email. Following a LinkedIn link provided by a friend of mine, I learned a little about the site administrator. It would appear that he owns Global Commodities Exchange and has about six years’ experience in the industry. To date, I have still been unable to get any additional information. Why is this important? Because the prices given in the newsletters are being ‘cherry picked.’ In other words, prices on inshell appear to be at the high end while meat prices are at the low end, probably of Mexican origin. There is no mention of availability, quantities being offered, who the packers and/or growers are, etc. While several of the articles have been informative, the failure to provide answers to the above questions results in a misleading view of current market conditions. In an industry that is trying to get past a history of distrust and acrimony, websites and newsletters that do not accurately reflect industry/market conditions help no one, especially where pricing is involved.